Standard Chartered Fears the Impact of Trade War on its Profit
Last updated on December 3rd, 2018
On Wednesday, Standard Chartered warned an escalating US-China trade war was influencing the business sentiment in its core emerging markets. Prior to that it posted a better than expected 31 percent rise in quarterly profit before tax.
The laid back comments on global trade reflect a more pessimistic tone that the July statement of the CEO Bill Winters, where he said that he saw a “minimal” hit to the bank’s performance from the Sino-US spat.
The multinational British lender is specifically sensitive to trade tensions, as can be perceived from its 150-year history of financing trade between Asia, Africa and other parts of the world. 40 per cent of its operating income id attributed to Greater China and the rest of North Asia.
In its earnings statement, Standard Chartered said, “Escalating trade tension and other macroeconomic factors are affecting sentiment in emerging markets.”
Two of the top economies of the world are already waging a tariff war over their trade disputes. The US duties are in place on $250 billion worth of Chinese goods, while Chinese duties are on $110 billion of US goods.
In the three months ended September 30,Standard Chartered posted a profit before tax of $1.1 billion. The figures are above the $814 million profit in the same period a year ago and higher than the $978 million average of analysts’ forecasts.
After the earnings announcement, the Hong Kong shares of Standard Chartered (2888.HK) rose as much as 2.7 percent. However, later it gave up a chunk of the gains to be up 0.7 percent at 0614 GMT, in line with the broader market.
The bank said that the trade tensions particularly impacted its wealth management business, as falling stock prices as a result of the economic uncertainty made retail customers more reluctant to invest.
In the quarter, wealth management income dropped 4.7 percent from a year-ago period to $465 million.
The results of Standard Chartered came after the bigger British rival HSBC posted a surprise 28 percent rise in third quarter earnings earlier this week, as it tightened its grip on costs. The rival had said that the impact of the trade spat was “not yet manifesting itself in business activities in a meaningful way.”
Although the British lender witnessed a hike in its profits, the fears of trade war’s impact on its profits remain.
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